From Chapter Five:
How Dealers Hide the Truth About the Car You’re Trading In
. . . but Never Actually Owned
“Drive-in banks were established so most of the cars today could see their real owners.”
—E. Joseph Cossman
Salesperson & Author
Salesperson & Author
"...Dealers decide in each situation how to present the same reality. The pencil on the left side of the table above might work well for a customer who is wise to what his trade-in is truly worth in the marketplace, but is motivated by seeing a huge discount. The presentation on the right works best with customers like the Hills who “don’t want to take a loss” on their trade-in. Either way, the customer’s out of pocket money is identical. With a $20,000 loan payoff such as the Hills, the “loss” as customers define it remains the same in both examples.
"The pencil on the right is really just a childish way of accommodating customers who are putting their heads in the sand. Oh, and banks want to see the deal this way, too. It helps them finance negative equity on deals without having to ‘fess up about it. Bottom line, each customer pays the same $26,000 cash difference regardless of how the dealer shows the numbers.
"However, margins like the $10,000 markup in our fictitious example are non-existent without massive dealer invoice-to-MSRP margins. Since manufacturers know customers study and compare MSRPs between competing products, they set sticker prices only as high as they dare. They then charge their dealers the maximum price possible—dangerously close to MSRP—with little discount for the dealer to play with. They want to leave as little profit possible for the dealer, opting instead to have their cake and eat it too. More of the profits, while remaining as distant from customer disappointment issues as possible. That is their dealers’ job. Disastrous..."
